IDA OKs new bond package for I-16 northern tract

The Effingham Industrial Development Authority approved a restructured bond package last month as part of its financing for the purchase of the I-16 northern tract.

IDA members approved a bond package of $4.455 million, and the bonds were validated Dec. 9, three days ahead of the scheduled closing.

Bond attorney Tom Gray advised IDA members at their November meeting that their parameters were not to exceed $6 million and that they likely would issue bonds for less than $5 million.

As part of the Medient deal, IDA attorney Ted Carellas said the IDA had to buy back some of the bonds it had issued. Doing so, he pointed out, would allow the IDA to stay in the good graces of the Internal Revenue Service. It prevents, according to Trey Monroe of Merchant Capital, the authority from having a $1 million problem.

“It prevented any kind of problem we could have with the IRS,” he said.

The new taxable bonds, said Monroe, will replace tax-exempt bonds issued in 2011. To do that, the IDA had to perform a bond offer.

“It was successful,” Monroe said. “We do have commitments from enough investors.”

Medient Studios will build a movie/DVD/video game production facility on the 1,550 acres of the I-16 northern tract. It will lease the property for 20 years, with an option to buy the land at any time during the lease.

The IDA didn’t know how many bonds it would be buying back at the time or what the rate would be, Monroe added. The IDA needed to do a supplemental resolution, with the interest rate and debt service included. The authority’s overall debt service will be increasing by about $65,000, Monroe estimated.

“It was a good problem to have, given the project,” he said.

The IDA issued $39.995 million in taxable and tax-exempt bonds in August 2011, with $16.81 million in tax-exempt status and $23.185 million in taxable bonds.

IDA Chairman Dennis Webb said last month the authority was aware it may have to push some tax-exempt bonds into a taxable status.

“We discussed this originally that this could be a problem down the road,” he said. “It’s no surprise.”